Japan telecom giant Softbank lost $350 million on its Indian investments

Published February 9, 2017 by lagmen
SoftBank Group Corp Chairman and CEO Son attends a news conference in Tokyo

Softbank’s India portfolio may be a loss-making machine, but the Japanese giant isn’t throwing in the towel yet.

In the last nine months of 2016, the Japanese telco posted ¥39.3 billion ($350 million) in “loss recorded as the amount of change in the fair value of the Company’s investments, primarily in India,” according to a Feb. 8 company filing. (Worth noting: A potentially larger loss was offset by a gain of ¥16 billion—$144 million—during the same period, due to foreign exchange rate fluctuations.) The loss comes on top of a $555 million writedown on the value of Softbank’s India portfolio in the six-month period ending September 2016.

“With reference to the current markdown, portfolio company valuations are often driven by intricacies of accounting practices and currency fluctuations, and should not necessarily be seen as a reflection of their performance,” a Softbank spokesperson told the Economic Times. “Our major investments, including Snapdeal and Ola, continue to be recorded on our books at a value in excess of our blended cost basis. SoftBank remains deeply committed to its portfolio in India and elsewhere in the world.”

So far, two of Softbank’s biggest India investments have taken the brunt of write-downs: Jasper Infotech, the parent company of e-retail giant Snapdeal; and Ola, India’s largest ride-hailing startup, which is owned by ANI Technologies. In 2014, Softbank invested $697 million in the former and $210 million in the latter, and has continued to sink money into both companies, which are also positioning themselves to raise more funds and take on American rivals like Amazon and Uber.

Other companies in Softbank’s India portfolio have also failed to deliver, including on-demand grocery delivery app Grofers, budget hotel aggregator OYO Rooms, and real-estate search portal Housing.com (which announced a merger with News Corp-backed PropTiger earlier this year).

Two years ago, Softbank announced plans to invest $10 billion in India by 2024, and since then has pumped $2 billion into internet-related projects and solar energy efforts in the country. Founder Masayoshi Son, one of Japan’s richest men, has also said he hopes to provide 1 million free electric cars to Ola drivers to help India’s clean energy initiatives.

Outside of India, Softbank performed well in 2016: The company reported net income of ¥857.4 billion ($7.6 billion) for April to December 2016, nearly doubling its profit in the same period of 2015. Much of that increase can be attributed to its sale of Alibaba shares. A recovery by US cell service provider Sprint, in which Softbank has an 83% stake, also contributed to earnings.

Tokyo-based Softbank likewise has some promising initiatives lined up: Its $100 billion Softbank Vision Fund, which has attracted high-profile investors like Apple, Qualcomm, and Oracle founder Larry Ellison, anticipates generation more than $750 million in annual income, the Wall Street Journal reported. The company’s $32 billion investment in chipmaker ARM in July will also help establish its place in the “internet of things,” which Son has labelled a “paradigm shift.”

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